Highlights

In June, ECSDA commented on the draft ESMA guidelines on CSD participant default rules and procedures. These supervisory guidelines will help national regulators ensure compliance with the relevant provisions of the CSD Regulation.

ECSDA insisted that CSDs should not have to implement different rules on participant defaults than other operators of financial market infrastructures, such as payment and clearing systems. We also recommended that the guidelines should clearly distinguish between non-bank CSDs and CSDs authorised to provide banking type ancillary services. Finally, we pointed out that some of the “minimum requirements” specified in the guidelines may occasionally conflict with national law, which could prevent some CSDs from implementing the guidelines in full.

The final version of the ESMA guidelines is expected to be published in 2017.

After speaking at the AFME Post Trade Conference in May, Soraya Belghazi took part in a panel on CSDs, asset segregation and depositary liability rules at the NeMa 2016 conference in Dubrovnik in June, together with ECSDA members Stjepko Čičak (SKDD), Sandor Szalai (KELER) and Arnaud Delestienne (Clearstream).

Gathering at KDPW’s headquarters in Warsaw for their Ordinary General Meeting on Friday 20 May 2016, ECSDA members re-elected Mathias Papenfuß of Clearstream as Chairman of the association.

Commenting on his re-election, Mathias Papenfuß thanked ECSDA members for their trust and said that he remained convinced that the association was more relevant than ever to help CSDs cope with the accelerating pace of market changes and regulatory pressure.

The two Vice-Chairs, Brigitte Daurelle of Euroclear and György Dudás of KELER Ltd, were also re-elected as well as Georg Zinner of OeKB CSD GmbH in his position as Treasurer of the association. The full list of elected Board members and Executive Committee members was published on the ECSDA website.

In 2015, the Eurosystem had announced its desire to improve the financial market infrastructure by the year 2020. One way to make the existing infrastructure more efficient would be for the Eurosystem to explore potential technical synergies between the TARGET2 (T2) payment system and the TARGET2-Securities (T2S) platform.

In April 2016, ECSDA took part in the first consultation on the future infrastructure for real-time gross settlement (RTGS) and issued a short response to outline three aspects worth considering from a CSD perspective, i.e.:

the need to assess the legal implications of further technical consolidation between T2 and T2S, as well as the impact on existing governance structures;

the importance of maintaining T2 and T2S as clearly distinct services, irrespective of any technical consolidation;

the need to address any concentration risk that would result from the consolidation of the T2 and T2S platforms.

At their first meeting of the year, Directors of the ECSDA Board invited Gerard Hartsink, Chairman of the Global LEI foundation, to discuss CSD-specific challenges around the implementation of Legal Entity Identifiers (LEI).

The LEI is a 20-character reference code to uniquely identify legally distinct entities that engage in financial transactions and associated reference data. By the end of 2015, more than 400 000 LEIs had been issued in 196 countries. In some countries, CSDs were appointed as the entities responsible for issuing new LEIs.

Once they implement the CSD Regulation, EU CSDs will have to report LEIs to regulators for their customers, but also for issuers for whom they provide the notary service.

In January, ECSDA responded to the Call for evidence of the European Commission on the EU regulatory framework for financial services. This large scale consultation was an opportunity for the industry to define priorities for the Capital Markets Union project (CMU), an action plan aimed at supporting growth and financial integration within the EU market.

ECSDA’s contribution included several suggestions for improving the quality of law-making in relation to post trade services. In particular, we recommended that:

The European Commission should reconsider its approach on impact assessments to add a stronger focus on the impact of legislative proposals on economic growth and job creation.

The “Level 1” and “Level 2” processes should be reviewed to avoid unnecessary technical details in binding legislation and to support more consistency between both levels.

Law-makers should avoid overlapping requirements and the inconsistent use of terminology across sectorial pieces of EU law. The notions of “custody” and “safekeeping”, for example, appear in several pieces of EU law without always being clearly defined, which results in legal uncertainty as regards the applicability of AIFMD requirements to CSDs.

The EU legislator should avoid imposing requirements on unregulated entities (such as transfer agents and registrars) indirectly via regulated entities (CSDs), especially when the regulated entities do not have the means to force third parties to comply with the applicable EU rules.

Finally, EU law should allow for more calibration of the requirements as regards smaller and less systemically important infrastructures.

Some of the comments made by ECSDA were supported by several other respondents and were analysed in detail by the EU institutions.

On 13 January 2016, a group of ECSDA representatives took part in a meeting organised by the CPMI and IOSCO at the European Central Bank in Frankfurt to discuss new international guidance on the cyber resilience of financial market infrastructures.

Several issues where discussed including:

the fact that smaller infrastructures with a low risk profile cannot be expected to have the same level of detail and sophistication in their cyber resilience framework as large, cross-border infrastructures;

the sometimes excessive emphasis put on the formalisation and documentation of cyber security plans, policies and procedures;

the notion of “critical” service providers;

the need to avoid the temptation to translate best practice standards on cyber security into binding legislation at local level.

A formal paper was later issued by ECSDA on 23 February to develop more detailed recommendations on these issues. ECSDA also contributed to the response of the World Forum of CSDs.